- 자료: Bryan Haig. “The Treatment of Interest And Financial Intermediaries in the National Accounts of Australia.” The Review of Income and Wealth, 1986, Series 32.
- 출처: The Review of Income and Wealth, Journal of the International Association for Research in Income and Wealth. 1951-2012.
※ 발췌 (excerpts):
ABSTRACT: This paper is divided into two main sections. The first part summarises briefly the main points which have arisen in the lengthy debate over the treatment of banking intermediaries in the national accounts. The discussion emphasises the method adopted in the early Australian accounts when banks were treated in the same way as the general government. It is argued that this method is simpler and provides a more realistic account of the functions of banks than the current SNA proposal.
The second part of the paper examines the functions of banks in Australia. It uses data of interest and administration cost for separate banking institutions to examine the incidence of bank costs. It is concluded that the costs do not fall on borrowers or lenders but are a charge in providing a communal service in the establishment and maintenance of the financial system.
1. Introduction [n.1]
The treatment of interest and banking has been one of the most widely debated issues in the Australian national accounts. in recent years, at least four major contributions have been made to this debate [1, 3, 10, 13]. In all cases, they represent a reaction to the conventions proposed by the SNA. An early contribution, by H. P. Brown, criticised the first SNA approach largely on the grounds that it did not provide a realistic picture of the activities of banks [3]. The more recent articles have commented on particular difficulties raised by the current SNA approach.
[1] Arndt, H., Measuring Trade in Financial Services, ^Banca Nazionale del Lavoro Quarterly Review^, No. 149, June 1984.
[3] Brown, H. P., Some Aspects of Social Accounting─Interest and Banks, ^Economic Record^, 25, Supplement, August 1949, 73-92.
[10] Covick, O. E., Productivity-Geared Wages Policies: Some Problems Arising from the Growth in Financial Enterprises, ^Journal of Indusrial Relations^, June 1982
[13] Haig., B. D., The Treatment of Banks in the Social Accounts. ^Economic Record^, 49, December 1973, 624-628.
Reflecting the interest in the treatment, the Australian Statistician has adopted three different methods to handle the activity of banks in the official estimates of national income and expenditure. In the early estimates, for 1946 and 1947, banks were treated in a similar fashion to other businesses. Interest has always been treated as a transfer item, and this method of handling banks led, therefore, to a negative product of banks. In a comment on the first official estimate it was suggested that this resulted from the failure to charge bank costs against the income of trading businesses, and it was noted that a major objection to this approach was that it was not possible to sub-divide total product into industries or sectors [3, p. 87].
The method was changed in 1948 and a new approach was adopted which treated banks in the same way as governments. The contribution of banks to national income was measured by the payment of wages, and national expenditure included an item for "the net expenditure of financial enterprises". It was explained that banks were regarded as "providing financial services to the economy as a whole, comparable in type to a number of government services such as the administration of justice" [4, p. 5]. In a subsequent paper, the then Director of National Accounts, H. P. Brown, spelt out at some length the reasons for this approach [3].
Finally, in 1973 the then Australian Statistician adopted a treatment similar to the current (1968) SNA treatment. This approach divides interest into a pure interest component and a service charge for organising funds. Part of the service charge (on consumer debt) is treated as final expenditure and included in personal consumption. The remainder (the imputed bank service charge) is treated as a cost of a nominal industry, which has a negative operating surplus of this amount.
The changeover in 1973 to the UN System provoked an exchange of views in the Economic Record [13, 14, 23]. The author of the present paper suggested that the previous approach adopted in the Australian accounts had a number of advantage over the new treatment, and that no reason were given for the change in treatment. In reply to criticism of the change it was argued that one factor was the need for international comparability, but it was also claimed that the new approach correctly treated bank cost as an intermediate expense of business.
However, comparisons shows that there is little difference between the new proposal and the first Australian treatment of banks. The product of industries is the same and GNP is not very different. The difference is that in the early Australian treatment, banks earned a negative product which was not distributed to industries whereas in the new SNA treatment the negative income of banks is avoided but only be showing a negative income for another (imaginary) industry.
The more recent criticism fall into two main groups. First, it has been claimed that the imputation of bank costs complicates the interpretation of the national accounting figures and does not reflect the function of banks. Secondly, it is argued that the deduction of the imputed bank service charge (IBSC) from total product reduces usefulness of the accounts. It has been pointed out, for example, that the neglect of any final output from banking understates GDP [n.2], and that this understatement has become relatively more important, leading to an error in the trend of product.
It has also been argued that the present treatment has resulted in errors in estimating product of particular industries and sectors[10]. The lack of an industry or sector division of the IBSC has led to the total amount being charged against the product of a particular sector. This has resulted in a large error because the deduction includes the final expenditure component was as well as amounts attributable to other sectors. In a recent calculation made by the Australian Treasury, for example, all the IBSC was attributed to and deducted from the product of the non-farm marketed sector of the economy. It was subsequently estimated that the amount deducted was nearly 50% greater than the ^total^ interest paid by the sector[10, p. 184]. The result of the calculation made by the Treasury have been used in annual wage determinations by the Australian Arbitration Court, and the error therefore had implications for economic policy. Not only was the deduction for the IBSC greatly overstated, but the trend in the resulting product of the sector was also incorrect.
A final criticism is that the present SNA treatment reflects only one activity of financial enterprises─that of organising funds for borrowers. Arndt, for example, has proposed that banks perform three major functions, comprising services rendered to the community at large, services to depositors and services to borrowers.[n.3]
"It would seem obvious that banks perform all three functions and, more particularly, provide services to both depositors and borrowers. Ideally, therefore, one would look or an allocation of the imputed bank service charge between these two main categories of bank customers and then, within each category, between services which meet final demand and thus contribute to GDP, such as those rendered to households, and those which enter into the costs of production of enterprises (and government) and should therefore be excluded from GDP as intermediate products. If this makes unmanageable demands on statistical services, it becomes a question of which simplification is conceptually to be preferred."
In addition to the theoretical and conceptual issues raised in the treatment of banks, the practical considerations have become very important. It has been noted earlier that the current treatment leads to misinterpretation and errors in using the data of product of industries. To the extent, also, that the current treatment understates final output of banks it leads to error in measurement of the growth of GDP. In recent years the Australian finance sector has increased significantly. In 1949, when the question of the treatment of banks was first raised, financial intermediaries accounted for about 5% of GDP; now they account for about 14%. In recent years the annual rate of increase in employment of the financial intermediaries has been about 20%, compared to about zero change for the non-farm sector of the economy as a whole.[n.4] The financial enterprise sector is now nearly half the size of the government sector. The financial sector will, relatively and absolutely, increase in the near future as a result of further changes envisaged in the scope of the sector[n.5] and a resolution of the various problems encountered in the present treatment is of some urgency.
In this paper I renew the criticism of the various SNA proposals. It is argued that neither proposal reflects the function of the banks. It is proposed that an evaluation of the service provided by banks leads the conclusion reached, in 1949, by H. P. Brown, and used in the 1950s and 1960s in the Australian National Accounts. That is, that banks provide a communal service and their cost cannot either in principle or in practice be allocated to users of bank services.
The next part of this paper reviews briefly the various methods proposed for handling banks in the national accounts. The following part considers the types of activities undertaken by banks and the allocation of the cost of these activities.
2. The Treatment of Interest and Financial Intermediaries
The crux of the problem of evaluating the contribution of banking enterprises to aggregate output lies in the fact that typically the services of banks are not sold to customers at clearly recognisable market prices. Banks (and other financial enterprises) levy various charges and commissions, but the excess of these receipts over the relevant enterprises' expenditure on goods and services purchased from other enterprises is typically small and generally insufficient to cover their wages, salaries and supplement payments. As the notes to the British National Accounts explain:
The reason for this peculiarity is that banks derive their income by lending money at a higher rate of interest than they pay on money deposited with them; payments are regarded as transfers and not as receipts and payments for a financial service. This income in a sense subsidises the provision by banks of those services for which inadequate payment is received in the form of bank charges and commissions. Other financial companies are analogous to the banks in the way in which they derive their income, many of them doing so almost entirely from the difference between the rates of interest which they charge and the rates which they themselves pay [19, p. 204]
Hence problems arise in treating the banks as ordinary enterprises. In the discussion of these problems two main approaches have been developed. One proposes the relaxation of the rule that interest is a transfer. It is proposed that interest is a factor cost (as with wages), or a charge for services [28, 30]. In this case the net administrative cost is a difference between "real" transactions. The alternative approach is to adapt various approaches (or models) used to incorporate expenditure of other activities which are financed by transfers.
The various treatments proposed to handle banks may therefore be classified first according to the treatment of interest, and secondly, according to types of models available in the national accounting conventions for different views of interest. A classification along these lines is set out as follows.
1. Interest as a transfer:
(a) the non-profit model, e.g. Kuznets [17], SNA [26];
(b) the government model, e.g. Brown [3].
2. Interest as a cost
(a) a service cost
(i) part only, e.g. SNA [33];
(ii) fully, e.g. Ruggles [27], Sunga [30];
(b) a factor payment
The basic distinction is between interest as a cost and as a transfer item. If interest is a cost there is no problem in measuring the output of banks─the treatment of banks follows that used for other businesses (although there are problems in recording the transactions in the social accounts─see Sunga [31]). If interest is a transfer, then it is necessary to look to other models used in national accounting to record expenditure financed by transfers. These models fall into two groups, depending on whether the activity can be regarded as benefiting specific transactions, or whether the activity can be regarded as a communal benefit (or results in a communal cost). In the former case, the model is "non-profit making bodies"; in the latter case it is "government". At various times national accountants have treated interest as a cost (at least in part) and have also adopted the two different models where interest is viewed as a transfer.
1. The arguments for and against treating interest as a transfer are well known. The main arguments in favour of the transfer conventions are as follows: First, it is difficult to have one rule for some interest payments and a different rule for others. But if government and household debt interest payments are treated as expenditure on services, gross product estimates will be distorted according to the extent of the National Debt and of consumer indebtedness existing during the particular period─characteristic, it is argued, of past financing decisions rather than of the current level of "production".[n.6] Secondly, there is the problem of where to draw the line distinguishing an enterprise's interest payments from it dividend payment.[n.7] Thirdly, there is the question of trying to keep the level of production recorded for an enterprise or indusry invariant with respect to the method by which that enterprise or industry is financed.[n.8] Fourthly, differences between interest rates are largely conventional and dependent upon the institutional framework of a particular place and time"[3].
1(a). The non-profit making model for banks has a long history, dating from the estimates of bank output by King and including the early estimates by Kuznets [17]. The 1958 SNA treatment also follows this model, with the expenditure of banks being allocated jointly to variouos sectors depending on holding of bank deposits. This treatment was developed from an analysis of the activities of deposit banks. It was argued that these banks provided free services to depositors which were balanced by the ommission of interest payments on deposits.
The approach has been criticised as applying only to deposit banks, and for the methods of allocating administrative costs according to deposits. It has been argued that the free services of banks (keeping accounts, and so on) are related to the turnover of accounts rather than the size of the balance at any time. Some writers have also objected to the imputation procedure particularly since there are no prices available for comparable products. This point is discussed below where it is argued that banking services are a public good and the valuation at cost price must be treated as an arbitrary valuation.
1(b). The government model was adopted by Brow, and formed the basis of the early Australian treatment. Brown considered that the operating costs of banks could not be allocated to either borrowers or lenders, but were a communal service, the provision of a banking system, which was equivalent to the communal services provided by governments.
Brown reached his conclusion ( ... ... ).
The secondary thrust in Brown's case was that the value of financial enterprises' services should be assessed at their costs to the financial enterprises themselves. Thus no allowance was to be made for any property income to originate in the financial enterprise sector. ( ... ... ).
( ... ... )
( ... ... )
2. Both these approaches (the old SNA and Brown's method) depend on the assumption that interest is not a cost for services or the payment to a factor of production. Granted that the current convention for the treatment of interest developed out of debates over several decades, however, it should not be lightly abandoned. In fact, however, the 1968 SNA treatment does involve the treatment of interest (at least in part) as a service cost. It is suggested that the difficulties which have arisen over this treatment are at least partly due to a mistaken view of the nature of the activity of banks.
( ... ... )
2(a)(i). In the 1968 SNA interest is regarded as comprising a pure interest component and a service component. The IBSC measures the service component which in imputed as a cost to trading activities. It has been claimed that the imputation of baking cost improves the measurement of product of banks and of total product and leads to a more useful division of product between industries.[n.10] The current SNA convention does not seem to have any of these advantages, however, as compared to the Brown treatment or, in fact, to the earlier SNA approach.
It could be objected that the imputation is a highly imaginary notion, which cannot be implemented because neither business firms nor banks regar interest as being divided into a service component, along the lines proposed, and a residual pure interest component.
While it does treat bank costs as an intermediate expense it overstates this cost by ignoring saless to final buyers. ( ... ... ).
2(a)(ii). Treating all of interest as a service cost alters the product of industries and total output, but the effect on product compared with the earlier SNA approach is, however, not clear. ( ... ... )
( ... ... )
2(b). The treatment of interest as a factor payment would also avoid the problem of the bank imputation and would seem to conform to long-standing national accounting views of the concept of value added of industries. It raises, however, problems in distinguishing the payment of interest to persons and for this reason this approach seems to have been discarded [15, p. 121].
To summarise briefly, the problem raised in the treatment of interest and bank raises a number of issues. They concern (1) the nature of interest flows; (2) the meaning of total product and value added of industries; (3) the use of the national accounts, and (4) the need for simplicity in recording transactions in contrast, in particular, to the complexity raised by imputation.
( ... ... )
3. The Allocation of Administration Costs
( ... ... )
The reason for this peculiarity is that banks derive their income by lending money at a higher rate of interest than they pay on money deposited with them; payments are regarded as transfers and not as receipts and payments for a financial service. This income in a sense subsidises the provision by banks of those services for which inadequate payment is received in the form of bank charges and commissions. Other financial companies are analogous to the banks in the way in which they derive their income, many of them doing so almost entirely from the difference between the rates of interest which they charge and the rates which they themselves pay [19, p. 204]
Hence problems arise in treating the banks as ordinary enterprises. In the discussion of these problems two main approaches have been developed. One proposes the relaxation of the rule that interest is a transfer. It is proposed that interest is a factor cost (as with wages), or a charge for services [28, 30]. In this case the net administrative cost is a difference between "real" transactions. The alternative approach is to adapt various approaches (or models) used to incorporate expenditure of other activities which are financed by transfers.
The various treatments proposed to handle banks may therefore be classified first according to the treatment of interest, and secondly, according to types of models available in the national accounting conventions for different views of interest. A classification along these lines is set out as follows.
1. Interest as a transfer:
(a) the non-profit model, e.g. Kuznets [17], SNA [26];
(b) the government model, e.g. Brown [3].
2. Interest as a cost
(a) a service cost
(i) part only, e.g. SNA [33];
(ii) fully, e.g. Ruggles [27], Sunga [30];
(b) a factor payment
The basic distinction is between interest as a cost and as a transfer item. If interest is a cost there is no problem in measuring the output of banks─the treatment of banks follows that used for other businesses (although there are problems in recording the transactions in the social accounts─see Sunga [31]). If interest is a transfer, then it is necessary to look to other models used in national accounting to record expenditure financed by transfers. These models fall into two groups, depending on whether the activity can be regarded as benefiting specific transactions, or whether the activity can be regarded as a communal benefit (or results in a communal cost). In the former case, the model is "non-profit making bodies"; in the latter case it is "government". At various times national accountants have treated interest as a cost (at least in part) and have also adopted the two different models where interest is viewed as a transfer.
1. The arguments for and against treating interest as a transfer are well known. The main arguments in favour of the transfer conventions are as follows: First, it is difficult to have one rule for some interest payments and a different rule for others. But if government and household debt interest payments are treated as expenditure on services, gross product estimates will be distorted according to the extent of the National Debt and of consumer indebtedness existing during the particular period─characteristic, it is argued, of past financing decisions rather than of the current level of "production".[n.6] Secondly, there is the problem of where to draw the line distinguishing an enterprise's interest payments from it dividend payment.[n.7] Thirdly, there is the question of trying to keep the level of production recorded for an enterprise or indusry invariant with respect to the method by which that enterprise or industry is financed.[n.8] Fourthly, differences between interest rates are largely conventional and dependent upon the institutional framework of a particular place and time"[3].
1(a). The non-profit making model for banks has a long history, dating from the estimates of bank output by King and including the early estimates by Kuznets [17]. The 1958 SNA treatment also follows this model, with the expenditure of banks being allocated jointly to variouos sectors depending on holding of bank deposits. This treatment was developed from an analysis of the activities of deposit banks. It was argued that these banks provided free services to depositors which were balanced by the ommission of interest payments on deposits.
The approach has been criticised as applying only to deposit banks, and for the methods of allocating administrative costs according to deposits. It has been argued that the free services of banks (keeping accounts, and so on) are related to the turnover of accounts rather than the size of the balance at any time. Some writers have also objected to the imputation procedure particularly since there are no prices available for comparable products. This point is discussed below where it is argued that banking services are a public good and the valuation at cost price must be treated as an arbitrary valuation.
1(b). The government model was adopted by Brow, and formed the basis of the early Australian treatment. Brown considered that the operating costs of banks could not be allocated to either borrowers or lenders, but were a communal service, the provision of a banking system, which was equivalent to the communal services provided by governments.
Brown reached his conclusion ( ... ... ).
The secondary thrust in Brown's case was that the value of financial enterprises' services should be assessed at their costs to the financial enterprises themselves. Thus no allowance was to be made for any property income to originate in the financial enterprise sector. ( ... ... ).
( ... ... )
( ... ... )
2. Both these approaches (the old SNA and Brown's method) depend on the assumption that interest is not a cost for services or the payment to a factor of production. Granted that the current convention for the treatment of interest developed out of debates over several decades, however, it should not be lightly abandoned. In fact, however, the 1968 SNA treatment does involve the treatment of interest (at least in part) as a service cost. It is suggested that the difficulties which have arisen over this treatment are at least partly due to a mistaken view of the nature of the activity of banks.
( ... ... )
2(a)(i). In the 1968 SNA interest is regarded as comprising a pure interest component and a service component. The IBSC measures the service component which in imputed as a cost to trading activities. It has been claimed that the imputation of baking cost improves the measurement of product of banks and of total product and leads to a more useful division of product between industries.[n.10] The current SNA convention does not seem to have any of these advantages, however, as compared to the Brown treatment or, in fact, to the earlier SNA approach.
It could be objected that the imputation is a highly imaginary notion, which cannot be implemented because neither business firms nor banks regar interest as being divided into a service component, along the lines proposed, and a residual pure interest component.
While it does treat bank costs as an intermediate expense it overstates this cost by ignoring saless to final buyers. ( ... ... ).
2(a)(ii). Treating all of interest as a service cost alters the product of industries and total output, but the effect on product compared with the earlier SNA approach is, however, not clear. ( ... ... )
( ... ... )
2(b). The treatment of interest as a factor payment would also avoid the problem of the bank imputation and would seem to conform to long-standing national accounting views of the concept of value added of industries. It raises, however, problems in distinguishing the payment of interest to persons and for this reason this approach seems to have been discarded [15, p. 121].
To summarise briefly, the problem raised in the treatment of interest and bank raises a number of issues. They concern (1) the nature of interest flows; (2) the meaning of total product and value added of industries; (3) the use of the national accounts, and (4) the need for simplicity in recording transactions in contrast, in particular, to the complexity raised by imputation.
( ... ... )
3. The Allocation of Administration Costs
( ... ... )
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